You are using an outdated browser and your browsing experience will not be optimal. Please update to the latest version of Microsoft Edge, Google Chrome or Mozilla Firefox. Install Microsoft Edge

October 28, 2016

Utilizing Patent Valuation to Achieve Your Business Goals

Subscribe to Updates
Bangkok Post, Corporate Counsellor Column

It has become common practice for companies to sell and license out patents, and even use patents as collateral, in order to secure loans from financial institutions or attract capital from investors. As a result, patent valuation has been thrust into the spotlight, challenging potential buyers of patents and lenders. This article discusses what buyers of patents should consider, and what lenders should take into account when providing loans with patents used as collateral.

Considerations for Potential Buyers

In considering whether or not to purchase a patent, the potential buyer should consider the patent from both a legal and a business perspective. From the legal perspective, the buyer should try to determine the patent’s strength, based on factors such as the duration of protection, the breadth of potential patent claims and how courts are currently interpreting these claims, court practices, the patent’s risk of being challenged in court, and its susceptibility to infringement.

From the business perspective, the buyer should try to determine the patent’s market potential, potential competitors, commercialization potential, suitability to the needs of its business, and alternative technologies, as well as general economic conditions.

Other considerations include government regulations, as these will govern the use and period of exclusivity of the patent and may also have an impact on its value. These broad considerations need to be balanced against one another at the beginning of the valuation process.

Case Studies

These legal and business considerations were taken into account by a major Internet technology company that recently purchased a multinational telecommunications company for USD 5.5 billion. The motivation behind the purchase was the telecom company’s mature patent portfolio. Although the Internet technology company never released the exact details of how it arrived at the price, a look into its U.S. Securities and Exchange Commission (SEC) filings offers some insights.

The company stated that the acquisition of the patent portfolio complemented its software expertise with hardware expertise, and the purchase would protect its operating system from lawsuits. In other words, the technology company saw this patent portfolio as a way to stay competitive and as a deterrent against patent litigation.

Another example is the recent purchase of a communications and IT company’s patent portfolio by a mobile technology company. According to the mobile company’s SEC filings, it agreed to purchase a portfolio consisting of more than 500 patents and numerous patent applications covering a wide range of cellular phone infrastructure technology for USD 22 million.

Certain statements in the SEC filings indicate that the patents would benefit the mobile company’s expansion into mobile applications for business-to-business and business-to-consumer transactions. It also looked at the profitability of the patents if damages arose from litigation, and what the revenue would be from licensing out the patents.

Loans with Patents as Collateral

If a borrower wants to use a patent as security for a loan, the lender should ascertain that the borrower is the actual owner of the patent. This is a straightforward task, unless the patent has been assigned. In jurisdictions where recordation of assignment is not required, tracing the owner may be difficult.

The lender should only accept that the borrower is the actual owner of the patent if the borrower can show a clear chain of title. The lender should also ensure that the borrower has addressed any liens and encumbrances against the patent.

The lender should then value the patent by determining what exactly is being offered (the invention, the patent, or both) and ascertaining the legal characteristics of the patent rights. The lender should also look at the capability of the borrower to utilize the patent rights in a commercial context.

In practice, a professional valuator will be involved at the request of either the lender or the borrower, and he or she will use a methodology based on a cost approach, an income approach, or a market approach. The lender should be satisfied not only that the borrower owns the patent, but that the patent is free of liens and encumbrances. In addition, the borrower should be responsible for paying for the valuation.

Every patent purchase is unique. Buyers have distinct needs and expectations. These should be well-formulated before beginning to value a patent. Understanding what there is to gain from purchasing a patent allows a buyer to focus on patents in the target market, before having to delve into more detailed valuation techniques.

Download Full Article
Related Professionals

Practices

Corporate/M&A

Intellectual Property

Location

RELATED INSIGHTS​ 

August 20, 2026
Vietnam’s Law on Bankruptcy and Rehabilitation No. 142/2025/QH15, passed by the National Assembly on December 11, 2025, does something many regional counterparts do not yet attempt: it instructs parties and arbitral tribunals on exactly what happens to an arbitration once a debtor becomes insolvent. Together with the Law on Commercial Arbitration No. 54/2010/QH12, the new law improves upon what used to be an uncertain area of practice, now providing an explicit, mandatory sequence of procedures. Suspension and Termination of Arbitration Proceedings Under article 40(2) of the law, once a Vietnamese court accepts a bankruptcy petition, any arbitration that concerns the debtor’s financial obligations must be temporarily suspended as soon as the tribunal receives the court’s notification. If the court subsequently issues a decision commencing bankruptcy proceedings, article 59(2) takes a further step: the suspended arbitration is terminated outright, and the underlying case file is transferred to the court handling the insolvency for resolution. The two provisions work as a sequence: first suspension, then termination and transfer, rather than as independent triggers. Meanwhile, article 60(4) reinforces this effect by vesting the bankruptcy court with exclusive jurisdiction over all claims against the debtor from the date the petition is accepted. Notably, this mechanism operates automatically, without the need for the insolvency court to issue a separate anti-arbitration order. The tribunal simply suspends or terminates the proceeding by operation of law once notified; however, Vietnamese law currently provides no procedure by which a party can apply to the insolvency court for permission to continue the arbitration despite the statutory effect. Practitioners with a Vietnamese counterparty in arbitration should treat notification of a bankruptcy filing as something to flag to the tribunal immediately since continuing to arbitrate a claim that has become subject to article 40(2) or 59(2) risks producing an award vulnerable
Read More
August 20, 2026
Thai law contains no provision that speaks directly to what happens to an arbitration when one of the parties becomes insolvent. The interaction between arbitration and insolvency is derived instead from the general operation of two separately drafted laws: the Bankruptcy Act B.E. 2483 (1940) and the Arbitration Act B.E. 2545 (2002). Because Thai courts have had few opportunities to interpret how these two statutes apply together, the practical answer to many questions, such as who represents an insolvent party in arbitration, whether an award will be enforced, and what happens to a foreign proceeding, depends on inference from general principles of insolvency, arbitration, and procedural law rather than on settled rules. Liquidation and Restructuring The Bankruptcy Act governs both liquidation, which winds up a debtor’s affairs, and restructuring (rehabilitation), which aims to preserve a business. The consequences for arbitration differ accordingly. In liquidation, the debtor’s assets vest in the official receiver, who alone can conduct or continue any arbitration affecting the estate; the debtor loses the authority to act on its own behalf. In restructuring, the plan preparer or administrator takes over that role, but there is more room for the debtor to remain involved, since the objective of rehabilitation is to keep the business operational. Restructuring carries an automatic stay that takes effect once the Bankruptcy Court accepts the restructuring petition. This stay can halt an arbitration regardless of where it is seated. In contrast, liquidation does not work through a stay; instead, the debtor’s loss of authority over its own assets and disputes is what constrains the arbitration. Neither proceeding provides a party a formal route to apply for permission to continue arbitrating—the Bankruptcy Act contains no such mechanism—though in restructuring cases the Bankruptcy Court may allow proceedings to continue where doing so will not prejudice
Read More
August 20, 2026
As part of its membership in Lex Mundi, Tilleke & Gibbins has released the latest edition of its Guide to Doing Business in Thailand, providing an overview of the legal, regulatory, and commercial considerations for companies establishing or expanding operations in Thailand. The 2026 edition offers practical insight into the country’s business environment, investment framework, and operational requirements. The guide covers a wide range of topics relevant to foreign and domestic investors, including: Investment incentives and promotion schemes Financial facilities and banking regulations Exchange controls and money transfers Import and export regulations Business structures and incorporation options Requirements for establishing a business Operational and compliance considerations Business cessation and insolvency procedures Employment and labor laws Taxation Immigration and visa requirements Prepared by Tilleke & Gibbins lawyers across multiple practice areas, the publication outlines key aspects of doing business in Thailand, including foreign investment restrictions, regulatory compliance obligations, corporate structures, employment requirements, and recent legal and economic developments affecting investors. The publication forms part of Lex Mundi’s Country Guides series, a global collection of jurisdiction-specific reference materials prepared by member firms around the world. Together, these guides help companies evaluate opportunities, compare regulatory environments, and plan international business activities across multiple markets. The full Guide to Doing Business in Thailand 2026 is available through the button below.
Read More
August 18, 2026
The Bank of Thailand (BOT) is seeking public comment on proposed amendments that would significantly expand know-your-customer (KYC) and customer due diligence (CDD) requirements for cash-related transactions at financial institutions (FIs) and specialized financial institutions (SFIs). Released on August 5, 2026, the proposed regulation would supersede BOT Notification No. 16/2569, which focused primarily on cash withdrawal transactions. The public comment period is open through September 3, 2026. The amendments reflect concerns that FIs and SFIs may be used to facilitate the movement, concealment, and conversion of criminal proceeds, potentially damaging institutional operations and public confidence in the financial system. Expanded Scope of Covered Transactions The most significant change is the broadening of the definition of “cash-related transactions.” Previously, the regulation covered only cash withdrawals and uncrossed check withdrawals. The amended regulation extends coverage to include: Cash deposits, check deposits, or receipt of funds from the public not in the form of deposit accounts; Thai baht (THB) banknote exchange (different denominations); Receipt of cash for issuing checks and drafts; and Purchase, sale, or exchange of foreign banknotes. Mandatory Identity Verification and Risk Management For all cash-related transactions, FIs and SFIs must require customers, or authorized or delegated persons, to present identification or verify their identity before every transaction, including one-time (walk-in) transactions. Specific identification requirements vary by transaction type, customer nationality, and channel (branch vs. electronic). FIs and SFIs must also establish comprehensive risk management processes and procedures for cash-related transactions. These requirements include identifying customers or authorized representatives in accordance with transaction-specific verification standards, analyzing customer behavior, implementing risk-management measures proportionate to the customer’s risk profile, and recording abnormal behavior in relevant systems. The BOT also encourages institutions to proactively guide customers toward transaction channels that offer greater traceability than cash. For corporate customers in high-risk business sectors—including foreign
Read More